Social security is the only saving grace for seniors who don’t have any active source of income. While this income is taxed on a federal level nationwide, some states chose to exempt taxing social security benefits to offer relief to their citizens. However, some states still charge state-level taxes on retiree’s social security income. Let’s explore 9 states that levy taxes on social security in 2024.
Connecticut
Connecticut is one of the least tax-friendly states for retirees because it levies taxes on all types of retirement income. However, single filers with an adjusted gross income of below $75,000 and joint filers with an adjusted gross income of below $100,000 are exempted from paying taxes on their social security. Retirees who earn more than this limit are taxed in the 3% to 6.99% range, depending on the senior’s filing status and adjusted gross income.
Montana
Montana doesn’t tax the entire social security income and offers exemptions to retirees below a certain adjusted gross income level. Single senior filers with an adjusted gross income below $25,000 are exempted from social security taxes, whereas joint filers have a higher deduction limit of $32,000.
Single filers earning more than $25,000 but below $34,000 and joint filers earning more than $32,000 but below $44,000 adjusted gross income can deduct half of social security income. Only 15% of social security income can be further deducted above this secondary deduction limit. The tax rate on social security will depend on the retiree’s filing status and income level, ranging in the 1% to 6.75% bracket.
Minnesota
Minnesota isn’t tax-friendly towards retirees because its income tax rates are among the highest in the country. Retirees may pay taxes in the 5.35% to 9.85% range on their social security income, depending on the senior’s filing status and adjusted gross income. Seniors earning below a certain level are entitled to deductions, lowering their tax burden.
Married couples filing jointly can collectively deduct up to $5,840 if their provisional income is below $88,630, whereas married couples filing separately can deduct up to $2,725 if their provisional income is below $44,315. Single filers and heads of households can deduct up to $4,560 if their provisional income is below $69,250.
New Mexico
Social security income is partially taxed in New Mexico, making it moderately tax-friendly for retirees. Taxes are charged in the 1.70% to 5.90% range, depending on their adjusted gross income and filing status. Individuals below the age of 65 are entitled to an exemption of $2,500, whereas those aged 65 and above can deduct up to $8,000.
Senior single filers can only claim this deduction if their income is at least $28,500. This limit is $51,000 for senior married filers. The income limit must be $36,667 and $55,000 for non-senior single filers and non-senior married filers respectively to claim the said deductions.
Rhode Island
While Rhode Island taxes most retirement income, it offers deductions to retirees earning below a certain social security income. Single filers in Rhode Island with a federally adjusted gross income up to $88,950 are exempt from paying Social Security income taxes. This limit is up to $111,200 for senior joint filers. Any retiree earning more than these levels will pay taxes in the 3.75% to 5.99% range. The actual tax rate will depend on the senior’s filing status and income level.
Utah
Utah fully taxes social security income, making it one of the least tax-friendly states for retirees. Any social security income included in the filer’s adjusted gross income is taxed at 4.95%. Some seniors may be eligible for a tax credit of up to $450 per person against retirement income, lowering their tax liability.
Vermont
Vermont isn’t tax-friendly for seniors because it taxes most forms of retirement income. Social security is taxed in this state, but filers can claim deductions based on their filing status and income level. Single filers, heads of household, widowers, and married separate filers earning below $25,000 are fully exempt from social security income tax. This limit is $32,000 for married joint filers. Those earning above $34,000 ($44,000 for married joint filers) will pay taxes in the 3.35% to 8.75% range.
Colorado
While Colorado partially taxes social security income, it offers significant deductions compared to other states. People aged 55 to 64 can claim a deduction of $20,000 annually, while people aged 65 and above can claim a deduction of $24,000. Married joint filers can claim this deduction amount individually, giving relief to most retirees. Any income above this deduction gets taxed at 4.40%.
Nebraska
Any social security income taxable federally is entitled to state taxation in Nebraska. Retirees in Nebraska can pay taxes in the 2.46% to 6.64% range, depending on their income level and filing status. While this state still charges taxes on social security income, it will eliminate this tax starting 2025. This step was initially tested in 2022 and will be fully implemented in the coming year, bringing much relief to retirees depending solely on social security benefits.
